Advice opportunity lies in HNW demand for alternatives

High net worth (HNW) investors’ escalating demand for alternative assets has exposed a gap in education that financial advisers are yet to capitalise on, according to new research commissioned by platform provider, Praemium.

The national survey of 181 HNW investors found 22 per cent already hold alternative assets in their portfolio, with 85 per cent of them planning to increase their allocation in the next 12 months. Survey respondents said alternative assets offered “diversification, inflation protection and returns less correlated with public markets”, properties that are highly valued amid ongoing volatility.

The survey found 46 per cent of HNW investors who do not currently invest in alternatives are considering doing so in the next 12 months, as investors seek non-traditional assets to strengthen their portfolios.

The research also indicated that appetite for alternative assets other than the ever-popular private equity has risen, including infrastructure, water rights, venture capital and hedge funds.

“While private markets have faced renewed scrutiny and valuation resets in recent months, wealthy investors continue to see alternatives as a strategic component of their portfolios,” Denis Orrock, Chief Strategy Officer at Praemium, said.

“Platforms play a key role in helping advisers access the growing range of alternative assets while providing the administration, reporting, and execution support to implement them effectively. The significant growth in funds allocated to alternatives on the Praemium platform, coupled with growing interest in our Spectrum solution, clearly signals that advisers are actively seeking platform partners with specialised expertise to support this dynamic asset class.”

Orrock also said now is the time for advisers to leverage this opportunity as HNW investors seek guidance to navigate the risks and further their understanding of alternative assets, as almost half of the survey respondents said they weren’t familiar with the range of alternative investments available.

“There’s a real opportunity for advisers to lead the conversation, particularly now,” he said.

“Clients want to understand how these assets perform in different market cycles, and they’re looking to their advisers to filter opportunities and provide clarity. Advisers who can bridge the access and education gap on alternatives will be well positioned to add value and differentiate their offer.”